Msc. Edilson Giffhorn - Speaker

PhD. Leonardo Ensslin

Msc. Rogério Lacerda

PhD. Sandra Rolim Ensslin

Msc. William Barbosa Vianna

Improving the Alignment of Strategic Objectives in the Outsourced

Projects Management

23rd European Conference on Operational Research5. – 8.7.2009, Bonn - Germany

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Santa Catarina Federal University - Brazil

Production Engineering Pos-graduation Program

Multicriteria Decision Aid Laboratory - LabMCDA

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Summary

1. Introduction

1.1 Social Issue

1.2 Bibliographical Support

2. Theoretical Construct

3. Construction of the Performance Evaluation Model

3.1. Model Structuring

3.2. Evaluation

3.3. Recommendations

4. Final Considerations

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1. Introduction

1.1 Social Issue:

The economic growth of Brazil demands increased infra-structural improvements in the country.

One of the areas that has been most affected by this growth is telecommunications.

The fall of market reserve laws and the state monopolies in 1998 were the cornerstone of rapid changes and demands of the telecommunications consumer market.

The new challenges faced by system operators resulted in the need for new Project Management practices and partial service Outsourcing.

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This led to an integration of both techniques, namely outsourcing of project execution.

The role of project managers became essentially that of managing contracts of outsourced project providers.

To a certain extent, the Project Manager no longer had direct control over activity resources but was held accountable for results.

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In this scenario, outsourced companies charter to their own needs causing conflict of interests and priorities, drops in productivity, delays, rework, and endangerment of the company image.

This situation comprises multiple undefined criteria:

The decision-maker is unsure about which considerations to take into account during evaluation of outsourced project providers; Pressure due to compression of goal attainment timelines forces the decision-maker to adopt intuitive management procedures; Misalignment between the strategic objectives of the contracting company and the outsourced providers.

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1.2 Bibliographical Support:

A structured process was adopted for the selection of articles that contribute to the provision of theoretical rationale for research.

A study of the reference material revealed a gap in methods adopted to identify, organize, measure and integrate KPIs in order to improve the alignment of strategic objectives.

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2. Theoretical Construct

2.1. Project Outsourcing and Performance Evaluation

In Brazil, outsourcing in telecommunications was definitively incorporated with the privatization of state-owned companies at the end of the 90s.

In this context, the final result of a project depends on the joint action of different companies. This calls for the use of tools that allow a broader understanding regarding which KPIs will improve the alignment of the strategic objectives between the companies involved.

Multicriteria Decision Aid – Constructivist (MCDA-C) approach was employed as the intervention instrument.

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2.2. MCDA-C and traditional MCDA methodologies

MCDA-C consolidation as a management instrument occurred in the 80s with the works of:

Roy (1996) and Landry (1995) – limits of objectivity for decision aid processes;

Skinner (1986) and Keeney (1992) – attributes (objectives, criteria) are specific to the decision-maker in each context;

Bana and Costa (1993, 1999) – MCDA convictions.

MCDA-C is a ramification of traditional MCDA to aid decision-makers in the contexts in which they have a partial understanding of this context, and wish to broaden this knowledge to better comprehend the consequences of their values and preferences.

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MCDA-C phases

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3.1 Structuring

3.1.1 Contextualization

The Case Study was developed in the branch of a telecommunications operator in southern Brazil. This operator has around 6000 workers, 10 million customers and yearly gross revenue of approximately 8 billion US dollars.

Up until the 90s: state monopoly.

In 1995: start of privatizations.

Supplier contracts are drafted in the researched parent company and in the branches the projects are conducted by outsourced companies.

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Subsystem of Actors

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3.1.2 Primary Assessment Elements

Open interviews were conducted in which the decision-maker was asked to discourse on this issue.

Statements were analyzed to identify Primary Assessment Elements (PAE): characteristics or properties that the decision-maker considers may impact his/her values.

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Direction of preference for each PAE is identified, together with the psychological opposite, to understand the consequences that the decision-maker wishes to avoid (Eden, Ackermann, 1992).

3.1.3 Concepts

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3.1.4 Means-Ends Maps

Broadening of understanding through identification of hierarchical relations and relations of influence between concepts.

“How can the end concept be obtained?” “Why is the end concept important?”

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Means-Ends Map for Professional Qualification and Testing Clusters

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The relations of influence structure is converted to a Hierarchical Values Structure by incorporating the understanding of preferential judgement of the decision-maker (Keeney, 1992).

3.1.5 Clusters

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3.1.6 Hierarchical Value Structure:

Label

Areas of Concern

Fundamental Points of View:

Strategic Objectives

TechnicalQuality

ObjectivesAlignment

Communication

Evaluate Performance of Outsourced Providers

FPV 6 – Technique

FPV 7 -Organizational

FPV 3 – Testing

FPV 4 - Priorities

FPV 5 – Routes

FPV 1 – Standards

Compliance

FPV 2 – Professional Qualification

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3.1.7 Descriptors - KPIs

The construction of ordinal scales to measure Fundamental Points of View result in Descriptors or KPIs.

Jeopardize

ExcellenceGood Level

Neutral Level

Market

KPI

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ordinal measurement

Hierarchical Value Structure for FPV 2:

KPIs

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3.2 Evaluation

KPIs are ordinal scales that do not allow mathematical operations. Information on differences of attractiveness should be added between levels to transform them into (numerical) interval scales.

The Macbeth method was adopted to transform ordinal scales into cardinal scales (Bana and Costa, 2008).

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3.2.1 Value Functions

Cardinal scales are built using information of difference of attractiveness between descriptor levels (ordinal) and M-Macbeth software, resulting in cardinal scales that meet preference judgments of the decision-maker.

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Cardinal scales for FPV Professional Qualification:

cardinal measurement

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3.2.2 Substitution Rates

Information that allows the integration of cardinal scales should be incorporated to display measurement of aspects that are considered strategic and tactical.

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Potential actions that represent a contribution to the transition from Neutral to Good level are created in each criteria in which an establishment of rates is desired.

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3.2.3 Global Evaluation and Impact Profile of the Status Quo

The global model is provided using the sum of models of each FPV.

The model was used to aid the management process.

The decision-maker selected three real companies.

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Status quo Impact Profile of the three companies:

strategicobjectives

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3.3 Recommendations

This stage is a support to identify ways of improving evaluated performance, and to understand the consequences of actions within the strategic objectives implemented using KPIs.

For this: are identified strategic objectives, in which performance enhancement is desired;

the corresponding status quo of the evaluated company impact level are displayed;

actors involved are used to seek alternatives to improve.

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KPI performance alteration – Revenue Loss with application of Alpha Actions:

0

2

3

4

5

Good Level

Neutral Level

KPI – Revenue Loss

Number of fines due to work stoppage with loss of revenue

Alpha Actions Portfolio:

• In initial meeting, convey norms for active system intervention;• Adapt use of cable ducts to prevent extension works from interfering with active systems;• Convey communication channels with the Management and Faults Centre;• Convey, in initial meetings, mandatory communication with the Management and Faults Centre before and after scheduled intervention to certify system standardization;• In works timeline planning, observe the need for prior scheduling for active system intervention.

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FPV2 Profile of Impact on status quo and with application of Alpha Actions:

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The Recommendations stage provided means for the decision-maker to identify:

where it is convenient to act; actions to promote enhancement; the consequences of implementing actions at local, tactical and strategic level.

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4. Final Considerations

The decision-maker specified strategic objectives and identified objective properties of the accountable context. These properties were measured using KPIs.

The following study contributions can be highlighted:

the use of a transparent and structured process to identify strategic objectives and the KPIs that operacionalize them;

a demonstration of the MCDA-C approach used to identify, organize, measure and integrate KPIs;

a demonstration of the management process used to promote actions that enhance status quo performance.

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References:

Bana e Costa, C. A. (1993). Três convicções fundamentais na prática do apoio à decisão. Pesquisa Operacional, 13, 1-12.

Bana e Costa, C. A.; Ensslin, L.; Corrêa, E. C.; Vansnick, J. C. (1999). Decision Support Systems in action: integrated application in a multicriteria decision aid process. European Journal of Operational Research, 113, p. 315-335.

Bana e Costa, C. A.; De Corte, J.M. & Vansnick, J.C. (2005). On the mathematical foundations of macbeth. In: Multicriteria Decision Analysis: state of the art survey [edited by Greco, J. F. & Ehrgott, S. M.], Springer Verlag, Boston, Dordrecht, London, 409-442.

Bana e Costa, C. A, Lorrenço João C. ,Chabas, Mamuel P. , Bana e Costa, João C. “Development of Reusable Bid Evaluation Models for the Portuguese Electric Transmissin Company”. Decision Analysis , Vol. 5, No. 1, March , 2008, pp. 22–42.

Eden, C. & Ackermann, F. (1992). The analysis of cause maps. Journal of Management Studies, 29, 309-324.

Ensslin, L.; Dutra, A. & Ensslin, S. R. (2000). MCDA: a constructivist approach to the management of human resources at a governmental agency. International Transactions in Operational Research, 7, 79-100.

Keeney, R. L. (1992). Value-focused thinking: a path to creative decision making. Harvard University Press, London.

Landry, M. (1995). A note on the concept of problem. Organization Studies, 16, 315-343.

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Roy, B. (1996). Multicriteria Methodology for Decision Aiding. Kluwer Academic Publishers, Dordrecht.

Roy, B. (2005). Paradigms and Challenges, Multiple Criteria Decision Analysis – State of the Art Survey. In: Multicriteria Decision Analysis: state of the art survey [edited by Greco, J. F. & Ehrgott, S. M.], Springer Verlag, Boston, Dordrecht, London, 03-24.

Skinner, W. (1986). The productivity paradox. Management Review, 75, 41-45.

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Questions?

Thank You

Msc. Edilson Giffhorn - edilson.giffhorn@gmail.comPhD. Leonardo Ensslin - ensslin@deps.ufsc.brMsc. Rogério Lacerda - rogerlacerda@gmail.comPhD. Sandra Rolim Ensslin - sensslin@gmail.comMsc. William Barbosa Vianna - wpwilliam@hotmail.com